Two Smart Pieces in the NY Times

Our colleague Harold Pollack has a thoughtful OP-ED in today’s edition.   His piece is deeply pessimistic about recent trends in quality of life for African-Americans in Chicago.

The paper also reports a quick debate on whether environmental regulation is a jobs killer.    For those members of the RBC community who are interested in “the details”,  here is a .pdf  of Michael Greenstone’s 2002 JPE paper that documents the economic costs of environmental regulation.   Here is a copy of the paper he mentions measuring the health benefits of that same regulation.

The Rich and Broder piece ignores one important point.   The Clean Air Act is not uniformly enforced across the United States.  Counties are assigned to “Non-Attainment” status and “Attainment” status.  When new regulations are imposed on the dirty urban counties, these “Non-Attainment” counties do lose some jobs (as documented by Greenstone) but these jobs do not all walk to China. Instead, they “leak” to other less regulated U.S areas (the Attainment status counties).   So, from a macro perspective — the job loss estimates based on micro regression methods overstate the economy wide impact.   Intuitively, if ozone regulation becomes more severe, Los Angeles may lose some jobs but they will be displaced to somewhere in Mississippi.

The bigger issue that the Rich and Broder piece raises is what we are willing to sacrifice to create new jobs.  U.S businesses would create “more jobs” if there was less labor regulation, environmental regulation and fewer benefits regulations tied to hiring.  In this age of experimentation, I have argued that we should run a randomized experiment to see if firms will hire more workers as they face less redtape and can fire at will.   Given that job growth now is crucial, let’s experiment with different strategies to see what is effective at “growing private sector jobs”.  Reliance on a government “Big Push” is unlikely to be a politically feasible strategy now.

 

Comments

  1. Tony P. says

    U.S businesses would create “more jobs” if there was less labor regulation, environmental regulation and fewer benefits regulations tied to hiring.

    Really??

    Every business I know seeks to “create” profits, not jobs. Sometimes, hiring more people is necessary in order to increase profits by serving more customers. So the proposition must be that “less … regulations” will result in more CUSTOMERS. Perhaps a clever economist can explain to me how THAT is supposed to happen.

    Meanwhile, I can certainly believe the proposition that “less … regulations” will result in more SOMETHING, but I say it’s more likely to be pollution and profits, rather than demand and jobs.

    –TP

  2. jm says

    Nice post right up until the final paragraph:

    “In this age of experimentation, I have argued that we should run a randomized experiment to see if firms will hire more workers as they face less redtape and can fire at will. Given that job growth now is crucial, let’s experiment with different strategies to see what is effective at “growing private sector jobs”.

    On reading this I immediately was reminded of Jonathan Swift’s A Modest Proposal. Experimenting with other peoples’ lives, yeah, that’s the ticket! It’s nice to know that my intellectual betters think of me as a lab rat.

    “The bigger issue that the Rich and Broder piece raises is what we are willing to sacrifice to create new jobs.”

    Who’s “we”, Kemo Sabe? As someone with guaranteed employment (I’m assuming you have tenure) and family income well within the top 0.5% of the distribution, what exactly will you be sacrificing? (Note: I’m not implying you and your wife are not deserving of your income, just that it appears that you, personally, have no skin in this particular game.)

    “Reliance on a government “Big Push” is unlikely to be a politically feasible strategy now.”

    True. But that doesn’t mean a Big Push shouldn’t be attempted. From a political perspective it would remotivate disaffected lefties, improving the Democrats’ electoral prospects next year. If done well, it even could begin the process of recapturing sufficient congressional majorities so that Big Pushes become feasible.

  3. Sean says

    Yes, if only every state were a Right-to-Work state, we could return, as a country, to being that shining city on a hill! The hill would be made of dung, sure, but we’d be on top of it!

  4. Benny Lava says

    This is the crucial part “The bigger issue that the Rich and Broder piece raises is what we are willing to sacrifice to create new jobs.”

    Most people would not be willing to accept a spike in cancer rates for lower unemployment. However most people don’t believe that there is a correlation between increased pollution and increased health issues like cancer. And most people certainly don’t see the draw back to CO2 emissions. So if there is a tradeoff between something like employment and climate change, you won’t sell that to the American public.

  5. Warren Terra says

    Y’know, in your last post I defended you against several commenters who said you were just the sort of person who could link to that asinine Becker piece seriously; I said there was no way you were that foolish, or that evil. And then you go and post crap like your proposal in your last paragraph, suggesting that if we just freed the hands of our Galtian overlords they’d cheerfully accept the opportunity to employ more workers, so long as they were given free reign to abuse them and to fire them.

    Well, put your money where your mouth is: tell your employer that they should feel free to treat you like crap, in the hope that they will thereby be empowered to employ more masochists like you. And tell Mark and whoever else runs the commenting policy here that the commenters here should be free to ignore the normal commenting rules, and be allowed to abuse you personally with profane language and personal slurs: maybe such freedom will free up the blogging “workplace” so that we can get maximum productivity out of the blog.

  6. SamChevre says

    So the proposition must be that “less … regulations” will result in more CUSTOMERS. Perhaps a clever economist can explain to me how THAT is supposed to happen.

    Glad to oblige.

    Last summer, when I had been looking for work unsuccessfully for a year, I started a little business making and selling sausage. I had to get permits from several different agencies, since it was a business dealing with meat.

    Now, it went really well; several of the inspectors I had to deal with helped me figure out how to work safely and legally.

    Then I moved. In the city I live in now, it’s illegal to process food for sale in an area zoned residential–which put a lot of small bakers and candy-makers out of business. I’m thinking that allowing people with inspected-for-safety kitchens to process food in their home kitchens would be a place where reducing regulation might help people have jobs; I couldn’t have started my business if I’d lived where I do now.

  7. Katja says

    Matthew E. Kahn: U.S businesses would create “more jobs” if there was less labor regulation, environmental regulation and fewer benefits regulations tied to hiring.

    That’s an interesting claim, given that the United States are among the least-regulated OECD countries in those regards. Or did Congress pass an act about mandatory paid parental leave while I wasn’t looking? Also:

    http://en.wikipedia.org/wiki/List_of_statutory_minimum_employment_leave_by_country
    http://en.wikipedia.org/wiki/Sick_leave

    Of course, I am pretty sure that we can get the United States down to full sweatshop country status if we tried hard enough, if that’s the suggestion. “Take that, Rwanda.”

  8. Ebenezer Scrooge says

    What Katja said. The US has very few restrictions on firing workers. An employer might do better on this score if it moved to Somalia. Glibertarians like Kahn might want to spend a few years there, enjoying the freedom from burdensome government regulations. I’m really getting annoyed–I suppose that Kahn knows his subfield, but he has enormous holes in his knowledge, and seems to think he can fill them with Econ 101.
    If Kahn were serious about labor mobility, he might want to read about the Scandinavian model. The Scandinavians take labor mobility very seriously, but don’t trash human beings in order to do so. Essentially, they ruthlessly get rid of as many low-wage jobs as possible, pushing employees up the skill ladder as many ways as they can, and shifting the high transition costs from workers to employers and the state. (This is the opposite of the “Moonlight and Magnolias” model, which has failed to develop the South since 1890.) It’s expensive, but you get what you pay for.

  9. Tony P. says

    SamChevre,

    I don’t know why your current city forbids commercial food preparation in residential zones. Maybe it’s just plain snootiness; maybe they had bad experiences with home-based sausage makers in the past. Whatever the reason, I note that it’s a local decision. Local governments are more responsive to the people, I keep hearing. Maybe you can get them to change the regs; maybe your neighbors (they’re people, too) would object.

    You don’t say so, but I have the impression you created exactly one job: your own. I think that’s great. If I had my way, most people would “work for themselves”, or “own their own jobs” as a friend of mine used to say. I don’t belittle your “job creation” in the least, but I note that you would like to MOVE that job, not “create” a new one. Quite honestly, I think that you, yourself, would end up WANTING to rent commercial space if you needed to hire people to help you.

    –TP

  10. SamChevre says

    Tony P–just to clarify. I’m not affected–I moved here because I got hired to a job. It’s other suppliers of my old customers who were affected.

  11. Barry says

    says:
    September 5, 2011 at 1:06 pm

    Matthew E. Kahn: “U.S businesses would create “more jobs” if there was less labor regulation, environmental regulation and fewer benefits regulations tied to hiring.”

    Katja: “That’s an interesting claim, given that the United States are among the least-regulated OECD countries in those regards. Or did Congress pass an act about mandatory paid parental leave while I wasn’t looking?”

    One of the big things about right-economists is that they ignore reality whenever it gets in their way (see Krugman for more examples).

  12. politicalfootball says

    U.S businesses would create “more jobs” if there was less labor regulation, environmental regulation and fewer benefits regulations tied to hiring. In this age of experimentation, I have argued that we should run a randomized experiment to see if firms will hire more workers as they face less redtape and can fire at will. Given that job growth now is crucial, let’s experiment with different strategies to see what is effective at “growing private sector jobs”. Reliance on a government “Big Push” is unlikely to be a politically feasible strategy now.

    The states are the laboratories of democracy. Mississippi has been tried, and it failed.

    Preaching futility is among the great rightwing traditions. In America, Professor Kahn tells us, it is impossible to do the things that we have done in America. It’s not “politically feasible.” Instead, let’s propose other ideas that have failed politically precisely because they failed as policy. This time around, maybe blacks will be good sports about being fired arbitrarily.

    It’s no longer good enough for the rightwing to turn the rest of the country into Mississippi. Better we should aim for Mississippi circa 1950.

  13. Warren Terra says

    Sam Chevre raises the point that some regulations may be unwise. This is certainly true; it’s also true when Yglesias goes on (and on, and on) about foolish licensing laws for manicurists and the like.

    But Kahn didn’t say that we need to reconsider some of our regulations, that existing justified should be forced to justify their existence. He suggested that we should experiment with letting some of our employers abuse and exploit their workers, because maybe then they’d employ some of them. I repeat my suggestion that – pending his explicit agreement, of course – the least we can do is abuse (and, were it possible, exploit) Kahn in the manner he feels appropriate for people less privileged than himself, the manner he feels is the key to revitalizing our economy.

  14. Dan Staley says

    I’m reading more and more hokum like this lately. And I always return to asking the same question in the title of one of Wendell Berry’s books: “What are People For?

  15. says

    The interesting thing about regulations like the one SamChevre complains about is that they’re written *for* big companies — both in the sense that many of the inspection rules are written under the assumption of a certain size of operation, and that they act to keep smaller players from entering certain markets. They’re not so much about government and jobs as they are about regulatory capture.

    Meanwhile, it’s interesting that among the things that “we” are apparently unwilling to sacrifice to create jobs is another few percentage points of mrginal tax rate on income above $250K a year. Nope, can’t have that, has to be low-end wages, workplace safety and general public health.

  16. says

    Robert Reich’s piece in yesterday’s times would seem to put the lie to the idea that productivity necessarily results in jobs, much less better jobs. Like JM said, the pattern over the last few decades has been that wealth isn’t trickling down. Benefits of efficiency haven’t resulted – “trickled down” – in better paying jobs, but rather making the rich richer. So no, I’d prefer not to throw away hard-fought regulatory gains in environmental quality of life on the slimmest hope that a few jobs might appear, as opposed to housing expansions, golf club memberships and vacations for the rich.

  17. says

    Policies that result in job loss through regulation are not limited to Democratic administrations. For instance, there is a fairly well-known administrative proclamation issued by a Republican president and effective January 1, 1863, that likely resulted in a significant loss of jobs in about eleven states.

Trackbacks

  1. [...] UPDATE: Matt Kahn notes that Clean Air Act regulation is not uniform across the nation, and insofar as regulations adopted pursuant to that law have reduced employment in some parts of the country, this has been offset by greater job creation elsewhere.  Indeed, this differential effect is one reason why the Clean Air Act was amended to impose greater restrictions on “cleaner” areas, as B. Peter Pashigian documented in a 1985 paper. [...]